Table of Contents
1. Activity results...... 3
2. Major Risks ...... 19
3. Management Bodies ...... 26
4. Development Forecasts ...... 33
5. Significant Transactions...... 42 Large-scale and significant transactions concluded...... 42 Transactions with related parties ...... 47 Loan Agreements...... 50 Off-balance reporting ...... 53 6. Investments ...... 55
7. Information about the shares ...... 60
1. Avtivity results
During the past year of 2008 the activity of the companies from the structure of Holding Roads Plc focused on active participation in infrastructure construction tenders organized on the territory of the Republic of Bulgaria. Except the participation in big tenders, the activity of Holding Roads Plc also included:
• participation in infrastructural construction tenders on the territory of the Republic of Albania;
• investment in stock and shares of legal persons which are engaged in business operations similar to the business operations carried out by the Company;
• organization and creation of conditions for carrying out the business operations of the holding structure;
• support of the Company’s subsidiaries in the performance of their investment operations which are necessary to provide resources for the projects which they implement, as well as offering assistance to them in carrying out their day-to-day ordinary business operations.
The consolidated income which was generated by the business operations of Holding Roads Plc for 2008 is estimated at BGN 200 002 thsnd which is more by 32% in comparison with the previous year when the income which was generated by the business operations were equal to BGN 151 546 thsnd. The consolidated net income by sales in 2008 is more by 26% in comparison with such income in 2007 and is estimated at BGN 189 529 thsnd, while in 2007 it was equal to BGN 150 534 thsnd. The consolidated net income by sales of services amounts to BGN 145 038 thsnd, while in 2007 it comes up to BGN 119 455 thsnd.
The consolidated financial income for 2008 is estimated at BGN 10 473 thsnd. The consolidated financial income for 2007 is estimated at BGN 1 012 thsnd. The increase is due to the increase of income by interests which was BGN 827 thsnd in 2007 and increased to BGN 2 247 thsnd in 2008. In 2008 positive differences by operations with financial assets and instruments were generated within the amount of BGN 5 849 thsnd. The other financial income increased from BGN 1 thsnd in 2007 to BGN 1 938 thsnd in 2008.
In 2008 the consolidated expenses for business operations of Holding Roads Plc are estimated to BGN 196 371 thsnd, while in 2007 – BGN 133 892 thsnd. In respect with the expenses for business operations biggest is the share of expenses for hired services – 36% or BGN 70 961 thsnd. Expenses for materials are equal to BGN 62 784 thsnd which comprise 32% from the total expenses for business operations.
In 2008 the consolidated financial expenses are estimated at BGN 14 163 thsnd against BGN 6 077 thsnd during the previous year. Biggest is the relative share of expenses for interests. In 2008 such are equal to BGN 9 750 thsnd which comprises 69% of the financial expenses. In 2007 expenses for interests were equal to BGN 4 731 thsnd which comprises 78% of the financial expenses. The negative differences from exchange rate fluctuation considerably increased. In 2007 such were equal to BGN 52 thsnd, while in 2008 - BGN 3 325 thsnd. This is due to exchange rate differences arising from re-valuation of payments in CHF by credits agreements signed with UBS AG.
According to the audited consolidated statement for the year ending on 31st of December 2008, Holding Roads Plc has reported net profit within the amount of BGN 2 439 thsnd. In 2007 the net profit was equal to BGN 15 611 thsnd.
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Thousand BGN Indicators 2008 2007
Operating income 200 002 151 546 Operating cost 196 371 133 892 Net operating profit/loss 2 439 15 611 Net income from sales 189 529 150 534 Expenses by type 182 208 127 815 Financial income 10 473 1 012 Financial cost 14 163 6 077 Value of assets 394 966 196 204 Net assets 51 955 56 421 Shareholder’s equity 30 672 432 Number of shares 30 672 000 17 280
Financial Indicators 2008 and 2007 thousand BGN 250 000
200 000
150 000
100 000 200 002 151 546 196 371 133 892 50 000 2 439 15 611 0 Operating income Operating cost Net result
2008г. 2007г.
Page 5 of 61
Key ratios 2008
Income by sales profitability /const./ 1,29%
Return on equity /ROE/ /const./ 4,86%
Return on assets /ROA/ /const./ 0,62%
P/E /const./ 39,61
P/S /const/ 0,51
Total liquidity coefficient /const./ 1,07 Current assets/current liabilities Financial autonomy coefficient /const./ 0,13 Equity/liabilities
In the calculation of coefficients the following has been used:
• the net profit according to the audited consolidated annual statements for 2008;
• the net income by sales according to the audited consolidated annual statements for 2008;
• the equity according to the audited consolidated annual statements from 2008;
• the sum of assets according to the audited consolidated annual statements for 2008;
• the weighted average price from the last stock session at which stock of the Company was traded in 2008.
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Information about the basic categories of goods, products and/or services supplied, including an indication of their share in the income generated by sales as a whole and the changes which occurred during the reported financial year
The consolidated income by sales of Holding Roads Plc is estimated at BGN 189 529 thsnd in 2008, while in 2007 – BGN 150 534 thsnd. The income by construction and assembly works (CAW) comprises the biggest relative share, i.e. 76% in 2008 and 77% in 2007. It is followed by the income by sale of products (asphalt mixtures, inert materials, traffic safety facilities) which is 11% in 2008 and 7% in 2007.
Major products and/or services by class
Thousand BGN
Products/services by class 2008 2007 Amount Rel. Share Amount Rel. share Sale of asphalt mixtures 10 803 5,69% 3 196 2,12 % Sale of inert materials 8 876 4,68% 3 111 2,07 % Sale of traffic safety facilities 1 959 1,03% 4 512 3,00 % Transport services and machines leasing 482 0,25% 212 0,14 % Construction and rehabilitation 144 556 76,3% 115 662 76,77 % Other income 22 853 12,06% 23 958 15,90 % Total income 189 529 100 % 150 651 100 %
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Breakdown of income by basic categories of products/services
Breakdown of income by basic categories of products/services 2008
5,7% 4,7% 1,0% 0,3% 12,1%
76,3%
Construction and rehabilitation Sale of asphalt mixtures
Sale of inert materials Sale of traffic safety facilities
Transport services and machines leasing Other income
Breakdown of income by basic categories of products/services 2007
0,1% 2,1% 3 % 15,9% 2,1%
76,8%
Construction and rehabilitation Sale of asphalt mixtures
Sale of inert materials Sale of traffic safety facilities
Transport services and machines leasing Other income
Page 8 of 61 Income by categories of operations, domestic and foreign markets, and information about the sources of supply of production materials
Income by categories of operations Thousand BGN Income Categories 2008 2007 of products/services Amount Rel. share Amount Rel. share Sale of asphalt mixtures 10 803 5,69% 3 196 2,12 % Sale of inert materials 8 876 4,68% 3 111 2,07 % Sale of traffic safety facilities 1 959 1,03% 4 512 3,00 % Transport services 482 0,25% 212 0,14 % Construction and rehabilitation 144 556 76,3% 115 662 76,77 % Other income 22 853 12,06% 23 958 15,90 % Total income 189 529 100 % 150 651 100 %
Main clients of the companies in the Group are the state, municipal and local institutions which are responsible for the construction and maintenance of the road infrastructure.
The business operations of the companies are diversified both in terms of type of works and in terms of assignors. The Holding fulfills orders assigned by the Road Infrastructure National Agency and the Ministry of Regional Development and Public Works, as well as construction contracts made and entered into with various municipalities and with private investors.
Income by Employer
Thousand BGN Income Employer 2008 2007 Amount Share Amount Share National Road Infrastructutre Agency 59 220 31,24% 71 066 47,17% Ministry of Regional Development and 338 0,18% 10 598 7,03% Public Works Municipalities 54 386 28,7% 31 731 21,06% Other 75 585 39,3% 37 256 24,73% Total income 189 529 100% 150 651 100%
Page 9 of 61 A main contractor of the companies is the Road Infrastructure National Agency, holding a relative share in the total income equal to 31% in 2008, respectively 47% in 2007. The share which is held by the municipalities in the total income is equal to 29% in 2008 and 21% in 2007. In 2008 0,18% of the income is held by the Ministry of Regional Development and Public Works, while during the previous year it was 7%. The share which is held in the income by other assignors is 39% in 2008 and 25% during the previous year.
Income by Employer 2008
39,9% 31,2%
0,2%
28,7%
Road Infrastructure National Agency Ministry of Regional Development and Public Works Municipalities Other
Income by Employer 2007
24,9%
47,2%
11,3%
9,6% 7,0%
Road Infrastructure National Agency Ministry of Regional Development and Public Works Sofia Municipality Other municipalities Other
Page 10 of 61 During the previous two years the business operations of Holding Roads Plc and its subsidiaries were concentrated fully on the home market.
The basic raw materials and supplies which are used in the road construction operations are bitumen, inert materials and asphalt mixtures.
The companies are not dependent on suppliers because the market of raw materials and supplies for road construction works is well developed and enjoys sufficient number of contractors. The management of Holding Roads Plc elects to cooperate with suppliers who offer optimal prices, high quality, flexible structure of the supplies and payment. In order to secure the best possible financial conditions the Holding buys fuels and process salt in a centralized way and supplies it to the companies in the Group.
The companies in the structure hold concessions for exploitation of quarries for yielding of inert materials and own asphalt facilities. For the more remote sites which cannot be provided with locally produced inert materials and asphalt mixtures, the latter are provided through purchase from suppliers.
Analysis of the ratio between the achieved financial results reported in the financial statements for the financial year and the earlier published forecasted results
In the beginning of 2008 Holding Roads Plc prepared a forecast of the anticipated income and financial result in 2008 on a consolidated basis. According to such forecast, the anticipated consolidated income is BGN 210-220 million, while the anticipated net profit is BGN 42 million.
According to the audited consolidated financial statements for the year ending on 31st of December 2008, the income which was generated is equal to BGN 202 002 thsnd, while the net profit of the group equals BGN 2 439 thsnd. The reason for which the achieved results vary from the forecasted results is the changes which occurred in the macroeconomic frame.
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Unusual events and occurrences which have a significant impact on the business operations, the income generated and the expenses made, and assessing their impact on the results during the current year
The business operations of Holding Roads Plc and its subsidiaries, the income generated and expenses made have not been influenced by events of unusual nature.
Employed financial instruments, financial risk management objectives and policy of Holding Roads Plc, including hedge policy and exposure to price, credit, liquidity and cash flow risks
During the reviewed period the companies in the Group did not use financial instruments such as securities, cash market instruments and derivative financial instruments such as financial options, futures and forward transactions, interest rate and foreign currency swaps. Characteristic of the business operations of the companies in the Group is the use of bank guaranties which are related to the implementation of infrastructure projects. Another basic financial instrument which guaranties the smooth and troubleless operation of Holding Roads Plc is the borrowing of credit to be used for circulating funds. Borrowing credits is required due to the fast growth in the sector and the continuing trend of growth of the number and volume of orders which the Company fulfills. The management of the Holding carefully analyzes and assesses the financial risks and searches for ways to neutralize the potential negative impacts on the financial indicators of the companies in the Group. The types of financial risks which are characteristic of the Group and the exposure of the companies to any one of the risks will be discussed in Section 2 Basic Risks.
Page 12 of 61 Analysis and assessment of the financial resource management policy, including an indication of the possibilities for payment of the liabilities, the eventual threats and the measures which the Issuer has undertaken or will undertake in order to eliminate them
Holding Roads Plc conducts a stringent financial resource management policy. The Company employs various techniques for reduction of the risk related to the amount and structure of the liabilities in order to guarantee their payment. Whenever credits are borrowed, the Company carefully analyzes and assesses the market situation and the specific funding conditions, especially in the cases of investment project funding. The Company has implemented a policy for on-going monitoring of the receivables. For such purpose the Finance and Accounting Department reviews the receivables by clients and the received revenues and analyzes the outstanding payments on weekly basis.
Basic characteristics of the internal control system and the risk management system applied in the process of preparation of the financial statements
Holding Roads Plc applies the internal control system which was adopted by the management in order to achieve order and effectiveness, timely identification and prevention of the risks in its performance. The purpose of the internal control is to comply with the strategies, plans, internal regulations and procedures for carrying out business operations in the company, to ensure effective and efficient operation of the company, reliable financial reporting, storage and protection of the company’s assets.
The internal control of Holding Roads Plc covers the following specific activities:
- control over the operation of the current accounting and the primary document turnover;
Page 13 of 61 - control over the competence of the employees who perform financial and reporting functions;
- control over the completeness, content, authenticity and timeliness of the financial statements and other financial information /internal statements and reports/ which is submitted to the management;
- control over the completeness of the scope and reliability of the financial information system;
- legal fulfillment of the fiscal and social insurance obligations;
- control over the preservation and storage of the assets;
- control over the actions of disposal of the assets and resources.
The specific activities, methods and procedures are carried out by the Internal Control Department of Holding Roads Plc in accordance with the following rules:
- organizational allocation of the functions for authorization, approval, accounting, storage and preservation of resources;
- periodical reporting and accounting of the individual companies in the structure of Holding Roads Plc;
- examinations for compliance of the financial statements and the overall financial information reported to the management of Holding Roads Plc with the defined requirements for completeness, authenticity and timeliness;
- inspection of specific processes, operations and sites by means of a pre-defined plan;
- stock-taking of tangible and financial assets;
- examinations for compliance with the documentation and archiving rules;
- examinations and tests of the computer information systems;
Page 14 of 61 - examinations for observation of the rules for physical access to resources /assets, premises, information, etc./;
- internal audit.
In the preparation of the annual consolidated financial statements of Holding Roads Plc the requirements of the Accounting Act and International Financial Reporting Standards have been observed. In the process of preparation of the statements accounting procedures have been applied which ensure that:
- the accounting policy approved by the governing bodies and elaborated in accordance with the International Financial Reporting Standards is observed;
- the business processes are accounted for truly, accurately and in a timely manner;
- the information which is supplied to the Accounting Department is submitted in a timely manner;
- software products, ensuring the automation of the processes, the systematization of the information, the easy access to the data of the primary documents and their reliable archiving, are available;
- corrective actions are initiated when mistakes of various nature are made in the Accounting Department.
The annual consolidated financial statements of the Company are subject to mandatory independent financial audit. The independent financial audit provides an independent opinion on the true presentation of the financial position and the result of the Company in the financial statements.
Page 15 of 61 Significant events which occurred after the date of preparation of the annual financial statements
Holding Roads Plc registered a branch in the Republic of Albania under the name Holding Roads Plc (Dega ne Shqiperi). The seat of the branch is at Temisoklu Germeni Street, office 3/10, Tirane. The branch is represented by Viktoria Simeonova Racheva Slavkova.
Holding Roads Plc – Sofia city acquired 151 088 units of shares, comprising 51% of the equity of ZAT KOMPANIA CENTR, registered in Kiev, Ukraine. The price at which the shares were acquired is 151 088 Ukrainian Hryvnia.
At a special General meeting of the Shareholders of the Company which was held on 5th of January 2009 it was resolved, as follows:
1. To set up an audit committee, consisting of two members – Ralitsa Georgieva Krasteva, PIN: 7102196579, and Ralitsa Georgieva Kaidzhieva, PIN: 8109106558;
2. Not to print out the depository certificates of the shares, ensuing from the equity increase performed on 27th of June 2008, as the shareholders may supply themselves with the necessary document from a registered agent selected by them;
3. To pay an additional remuneration to the members of the Supervisory and Management Boards for the achieved results during financial year of 2007, as follows:
− Vasil Krumov Bozhkov – President of the Supervisory Board – the amount of BGN 3 840 000 (three million eight hundred and forty thousand);
− Orlin Georgiev Hadzhiyankov – President of the Management Board and Executive Director – the amount of BGN 100 000 (one hundred thousand);
−
Page 16 of 61 − Philip Petrov Stoyanov – Vice President of the Management Board and Executive Director – the amount of BGN 60 000 (sixty thousand)
Pending court, administrative or arbitration proceedings which are related to payments or receivables of the Issuer within the amount of at least 10% of its shareholder’s equity
Holding Roads Plc and its subsidiaries are not a party to any pending court, administrative and arbitration proceedings which are related to payments or receivables of the Company which exceed 10% of its shareholder’s equity.
Actions in the field of research and development
The companies in the Group do not carry out research and development operations.
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2. Major Risks
Generally, the risk factors can be broken down into the following groups: general, systematic and non-systematic.
All the risks which are related to natural calamity, social clashes, wars, big production breakdowns, ecological catastrophes and other extraordinary conditions can be defined as general risks. As a rule, these risks are minimized by usage of the relevant insurance products.
Systematic risks are related to the macro environment in which the Company operates due to which these risks are not subject to management by the Company’s management team. They influence the business operations of the Company in various ways and weights and emerge in different periods.
Non-systematic risks are the risks which are directly related to the business operations of the Company. These can be broken down into two groups: sector risk and corporate risk.
The sector risk is related to the condition and trends of development of the sector – raw materials and supplies, technologies, competition, profitability.
The corporate risk is related to the nature of the main activity which is carried out by the Company, the parameters and organization of the production and technology process, the provision process, the financial results and other factors. The impact of this risk on the business operations of the Company is conditional upon the professional qualities of the management. In order to minimize it the Company relies on the enhancement of effectiveness of the in-company planning and forecasting in order to ensure the prevention of negative consequences of a risk event which occurred. The business risk, liquidity risk and financial risk are varieties of the corporate risk.
Non-systematic risk
Market risk
Holding Roads Plc is exposed to the general risks to which all business entities which are engaged in the sector of infrastructure construction are exposed.
- The companies operate mainly on the Bulgarian market of road construction services where the volume of orders is directly dependent on the state budget, municipal budget and international project funding agreements and the companies cannot influence such volume. This requires searching for new markets, expanding the scope of the services which are offered and the activities which are performed, purchasing new equipment;
- The delay of payments by the Road Infrastructure National Agency influences mostly the financial status and the liquidity of Holding Roads Plc and its subsidiaries.
According to data supplied by the Road Infrastructure National Agency, the budget of RINA for 2009 is estimated at BGN 313 million, including:
− Capital expenses (capex) – BGN 121 mln, including:
− Ongoing repair and maintenance – BGN 123 mln
The totality of obligations, contracts and commitments undertaken to prepare new projects will need in excess of BGN 2 billion for 2009.
In order to bring the infrastructure into an acceptable condition, it is necessary to secure funds which are 2 or 3 times more than the funds secured for a period of 4-5 years.
Another basic risk which is related to the business operations of Holding Roads Plc is the continuous increase in the competition of Western companies. The increased competition reduces the rate of return which is envisaged in the tender offers in order to be able to win any tender.
Page 20 of 61 While managing the market risk, special attention is given to enhancing the business effectiveness, optimizing the cost and improving the technical security by means of purchase of new and highly productive equipment. Particular attention is given to maintaining up-to-date information about the market situation and the other competitive companies in this sector. The available information is analyzed and used in operative and strategic decision-making.
Nature of demand
The activity of companies which operate in the sector of infrastructure, including also Holding Roads Plc and the other companies in the Group, has a clear-cut seasonable character. Construction, rehabilitation and ongoing maintenance of roads are performed during the period from March to October, while the period of winter maintenance of the roads covers the time from November to the end of February. The winter maintenance public procurement contracts are signed for a period of 3 years. Most of the tenders for winter maintenance were held in 2006; therefore, in 2008 the assignment of new procurements in the field of winter maintenance was restricted. The fulfillment and the income by winter maintenance public procurements already awarded are directly dependent on the climatic conditions during the winter period.
Administrative risk
Most of the business operations of the companies in the Group of Holding Roads Plc over the last years were related to the European Funds. In this respect a main risk is the lack of reasonable preparedness of the state administration which is involved in the implementation of the programs related to these funds. Since the beginning of 2008 the payments have been suspended to Bulgaria for projects funded by ISPA, Phare and SAPARD, due to the irregularities found out in the funds spending. Our country is also threatened by the risk of losing access to funding by the EU
Page 21 of 61 Structural and Cohesion Funds, if it does not prove that it is able to control correctly the EU funds spending.
Financial risk
The financial risk is dependent on the nature of the Company’s business and influences the probability of achieving various effectiveness of such business, on the one side, but on the other side it ensues from the specific capital structure of the Company and the dynamic link between the financial resources which the Company uses.
The management monitors the overall risk and searches for ways of neutralization of the potential negative impacts on the financial indicators of the Company.
Currency risk
The currency risk ensues from the possibility that the amount of payments, related to credit exposures, due and payable in a currency other than BGN/EUR, may change. Holding Roads Plc and the companies in the Group do not face significant exposures related to currency risk.
Credit risk
The credit risk is manifested in the possibility that the Company will not receive a financial asset in the amount specified or at all, as well the possibility that the Company will receive a financial asset in its full amount, but on a later date than that agreed.
Specifically, the credit risk of Holding Roads Plc and the other companies in the Group ensues from the need of securing credit facilities in order to be able to issue bank securities, when participating in tenders, and to be able to implement the awarded sites, provide circulating funds and invest. The securing of credit facilities creates encumbrances on the property of the Company and complicates the cash flows service.
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Liquidity risk
Liquidity risk is the risk which ensues from the lack of compliance between the termed structure of assets and liabilities. The Company’s managers are flexible in securing the funds which are necessary in order to maintain liquidity. Meanwhile, the Company maintains a sufficient amount of liquid funds to meet its current needs.
The delay of payments by the Road Infrastructure National Agency influences most of all the financial status and liquidity of Holding Roads Plc.
Another factor which influences the business operations of the Company is the relation between the payments and the nature of performed activities. Usually, payments by the Road Infrastructure National Agency are effected at the end of the current year and the beginning of the next year. The reason is to be able to utilize the disbursed funds to the maximum possible degree. Road construction works which are performed in the beginning of the year (mainly excavation works) are paid worst (at lowest prices). But this is the period during which the companies which are engaged in the sector of road construction services have plenty of money. The highly paid services are offered during the summer and autumn periods when the companies already spent the funds received by them and the new payments are still slow in coming.
Price risk
This is the risk of increasing the prices of basic materials which are used in the work of the Company. The price of bitumen and asphalt mixtures is directly dependent on the price of petroleum on the international markets. The increase of price of fuels which are a significant item in the expenses of the Holding can make more expensive the price of execution of already awarded sites.
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Cash flow risk
The cash flow risk is the risk which ensues from the fluctuations in the amount of future cash flows. The management of the Company monitors this risk and searches for ways of neutralization of the potential negative impacts on the financial indicators of the companies in the Group.
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3. Management Bodies
Changes in management and supervision bodies during the reporting year Holding Roads PLC has a two-tier management system. The Supervisory Board consists of President - Vasil Krumov Bozhkov, Vice President - Nove AD Holding, City of Sofia, and Member Yoana Hristova Cholakova. The Management Board consists of President - Orlin Georgiev Hadzhiyankov, Vice President - Filip Petrov Stoyanov, members: Ivan Yankov Ivanov, Toni Petrov Petrov and Antoaneta Stoyanova Ormandzhieva-Racheva.
Organization structure
GENERAL MEETING
SUPERVISORY BOARD
Vasil Bozhkov Nove AD Holding AD Yoana Cholakova President Vice president Member
MANAGEMENT BOARD
Orlin Hadzhiyankov Filip Stoyanov Vice President President and and Executive Executive Director Director
Ivan Ivanov Toni Petrov Antoaneta Ormandzhieva Member Member Member
In 2008 entries were made in respect with the composition of the management bodies of the following companies in the Group: Road construction EAD (Patstroy EAD) – town of Lovech, Burgas Road Construction AD (Bulgarpatstroy AD) – town of Burgas, Bridge Construction Engineering EAD (Moststroy Inzhenering EAD) – Sofia city. As of 31st of December 2008 the composition of the management bodies of the companies in the Group was the following:
1. Road and Highways JSC (Patishta i magistrali AD), Sofia city - Board of Directors: Orlin Georgiev Hadzhiyankov, Ivan Yankov Ivanov and Philip Petrov Stoyanov;
2. Maintenance and Reconstruction JSC (Poddarzhane i vazstanovyavane AD), Sofia city – Board of Directors: Orlin Georgiev Hadzhiyankov, Toni Petrov Petrov and Philip Petrov Stoyanov;
3. Vida Road Construction JSC (Vidapatstroy EAD1), town of Vidin – Board of Directors: Orlin Georgiev Hadzhiyankov, Slavcho Georgiev Markov and Iosha Vasilova Georgieva;
4. Road Engineering M JSC (Pat Inzhenering-M EAD), town of Montana – Board of Directors: Orlin Georgiev Hadzhiyankov, Slavcho Georgiev Markov and Toni Petrov Petrov;
5. Road Construction JSC (Patstroy EAD), town of Lovech – Board of Directors: Orlin Georgiev Hadzhiyankov, Slavcho Georgiev Markov and Hristo Petrov Cholakov;
6. Burgas Road Construction JSC (Burgaspatstroy AD2) – Board of Directors: Orlin Georgiev Hadzhiyankov, Slavcho Georgiev Markov and Marin Gospodinov Ivanov;
1 EAD is the Bulgarian abbreviation for Sole-owned Public Limited Liability Company (PLC) or Joint Stock Company (JSC), Tr’s note 2 EAD is the Bulgarian abbreviation for Public Limited Liability Company (PLC) or Joint Stock Company (JSC), Tr’s note
Page 27 of 61 7. Road Construction Equipment JSC (Patnostroitelna tehnika EAD), Sofia city – Board of Directors: Orlin Georgiev Hadzhiyankov, Slavcho Georgiev Markov and Ivan Yankov Ivanov;
8. Road Engineering JSC (Pat Inzhenering AD), town of Pleven – Board of Directors: Orlin Georgiev Hadzhiyankov, Slavcho Georgiev Markov and Hari Dimitrov Naidenov;
9. Bridge Construction Engineering JSC (Moststroy Inzhenering EAD), Sofia city – Board of Directors: Orlin Georgiev Hadzhiyankov, Slavcho Georgiev Markov and Philip Petrov Stoyanov;
10. Smolian Road Construction JSC (Smolian Patstroy EAD), town of Smolian – Board of Directors: Orlin Georgiev Hadzhiyankov, Slavcho Georgiev Markov and Lyubomir Kostov Geshev;
11. Roads – Stara Zagora JSC (Patishta – Stara Zagora AD), town of Stara Zagora – Board of Directors: Orlin Georgiev Hadzhiyankov, Slavcho Georgiev Markov and Iordan Stanimirov Kalvachev;
12. Road Maintenance – Sevlievo Ltd. (Patno poddarzhane – Sevlievo EOOD), town of Sevlievo – Manager: Asen Marinov Marinov;
13. Road Maintenance – Oryahovo Ltd. (Patno poddarzhane – Oryahovo EOOD), town of Oryahovo – Manager: Toni Petrov Petrov;
14. Road Maintenance – Vratsa Ltd. (Patno poddarzhane – Vratsa EOOD), town of Vratsa – Manager: Toni Petrov Petrov;
Page 28 of 61 15. Road Maintenance – Yablanitsa Ltd. (Patno poddarzhane – Yablanitsa EOOD), town of Yablanitsa – Manager: Biser Ivanov Georgiev;
16. Bulber EOOD3 - Manager: Asen Lyubomirov Krumov;
17. Sofpatstroy EOOD, Sofia city – Manager: Philip Petrov Stoyanov;
18. PST Rosi EOOD, Sofia city – Manager: Boris Nikolov Dimitrov;
19. Balkan Roads Plc - Albania – Board of Directors: Nikolay Hristov Arabadzhiev, Viktoria Simeonova Racheva – Slavkova and Zheko Petkov Kolev;
20. AVB-2004 AD – Board of Directors: Georgi Kanchev Popov, Valter Nikolov Kolev and Dimitar Georgiev Gioshev;
21. ZAT Kompaniya Tzentar, Ukraine – Supervisory Board: Vasil Krumov Bozhkov, Orlin Georgiev Hadzhiyankov and Svetlana Mihaylovna Lozova; Management Board: Vadim Naumovich Pyatov, Georgi Kanchev Popov and Natalia Sergeevna
Przhevalska;
22. Consortium M & M Construction 2008 – Board of Directors: Dimitar Ginev Demirev, Philip Petrov Stoyanov, Rumen Kosev Yovchev and Georgi Kirilov Tasev;
23. Smart Way Plc – Board of Directors: Ventsislav Petrov Bechev, Stoyan Dimitrov Gardev, Pepa Veselinova Grozdeva – Mihova, Nikolay Hristov Arabadzhiev and Ivan Yankov Ivanov;
24. Moststroy East AD – Board of Directors: Holding Roads Plc Anatoluiy Nikolaevich Mindov and Moststroy JSC.
3 EOOD is the Bulgarian abbreviation for Sole-owned Limited Liability Company (LTD. or LLC), Tr’s note
Page 29 of 61 Changes in the basic principles of governance of the Issuer and of its business group during the reported period
During the reported period the basic principles of governance of Holding Roads Plc and of its business group have not been changed.
Information about the amount of salaries received by the members of the governing and supervisory bodies during the reported financial year
For their services in 2008 the members of the Management Board of Holding Roads Plc received the following remuneration: President of the Management Board - BGN 12000 monthly, Vice President of the Management Board – BGN 7000, and other members of the Management Board – BGN 5000 monthly.
In 2008 the remuneration of the members of the Supervisory Board of Holding Roads Plc is the following: President of the Supervisory Board – BGN 14 000 monthly and other members of the Supervisory Board – BGN 12 000 monthly.
The members of the Board of Directors of the subsidiaries have received remuneration equal to the amount of 5 minimal pays for the country monthly, to the exception of Moststroy Inzhenering EAD and Smolian Patstroy EAD where the remuneration of the members of the Board of Directors has been equal to 3 minimal pays for the country monthly.
At an extraordinary General Meeting of the Shareholders held on 5th of January 2009 it was resolved to pay additional remuneration for achieved financial results of the Company for 2007, as follows: BGN 3 840 thsnd to the President of the Supervisory Board, BGN 100 thsnd to the President of the Management Board and BGN 60 thsnd to the Executive Director Philip Stoyanov.
The members of the management bodies of Holding Roads Plc and its subsidiaries have not received any in-kind remuneration.
Page 30 of 61 There is no record of conditional and deferred remuneration during the year.
The members of the management bodies have not received sums for payment of pensions, compensations upon retirement or other similar indemnifications. The sums due by Holding Roads Plc and its subsidiaries for payment of pensions, compensations upon retirement or other similar indemnifications are only in the amounts and in the events provided for by the Labor Code upon origination of the relevant circumstances.
Information about the shares held by the members of the governing and supervisory bodies, procurators and top management in the equity of Holding Roads Plc and information about the options given on securities of the Company
The members of the governing and supervisory bodies and top management of Holding Roads Plc hold shares in the equity of the Company, as follows:
Member of Number of shares held Management/ as at 31 December 2008 Name Supervisory Board Shares % Vasil Krumov Bozhkov President of Supervisory 3 243 280 10,57 % Board Orlin Georgiev Hadzhiyankov President of 1 540 487 5,02 % Management Board
No options have been provided on securities of the Company.
Members of management or supervisory bodies of the Company do not have any special rights to acquire Company shares and bonds.
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4. Development Forecasts
In 2009 the business operations of Holding Roads Plc and the companies in the Group will develop in the following directions:
• Strengthening the Group's leading position on the Bulgarian market of road engineering services;
• Active participation in road engineering projects in the Republic of Bulgaria;
• Seeking new markets, including penetration of foreign markets;
• Fulfilment of commitments undertaken under existing engineering-, rehabilitation- and maintenance contracts, and commencement of work under the contracts made in the end of 2008;
• Optimizing relationships and activities within the Group in order to improve efficiency in general.
The business policy planned for next year, incl. expected investments and staff development, the expected return on investments and development, and planned significant transactions
Holding roads PLC is expecting that the volume of contracts will keep its upward trend also in 2009. The expected consolidated income in 2009 is BGN 220 million, and the expected profit is BGN 10 million.
In 2009 Holding Roads PLC and the group companies will participate in most coming tenders announced under the Transit Roads V Programme, as well as in the procedures to award contracts funded by the World Bank and various operating programmes. The Company intends to participate independently or in partnerships in coming tenders to award contracts for the building of large-scale infrastructure such as the Trakia Motorway and the Maritsa Motorway. Subsidiaries will continue their active participation in tenders for the award of various regional contracts. The Shareholding Company will continue to participate in international tenders.
Page 33 of 61
Expected tenders in 2009 (according to sources from the Road Infrastructure National Agency)
1. Capital works funded by the 2009 National budget
Trakia Motorway - 368,1 km in total, 172,7 km in operation. Budget funding provided for the commencement of a tender procedure to elect a contractor and third-party supervisor for:
Lot 2: Stara Zagora – Nova Zagora (30 km);
Lot 3: Nova Zagora – Yambol (36 km);
Lot 4: Yambol – Karnobat (50 km)
2. The Transit Roads V Project
Lot 4: Rehabilitation of Road II-73 Shumen – Karnobat (90 km);
Lot 8a: Rehabilitation of Road I-7, intersection with I-6 – Yambol (32 km);
Lot 12: Sections of Road I-4, total of 43 km. Veliko Tarnovo – Lyaskovets; Yastrebino – Omurtag; Prolaz – Targovishte; and Targovishte – Belokopitovo, one with reconstruction of a road interchange;
Lot 17: Rehabilitation of sections of Road II-16 of a total of 82 km. Mezdra – Rebarkovo – Eliseyna; Eliseyna – Svoge; Svoge – Novi iskar;
Lot 24: Rehabilitation of Road III-822 and Road IV-8223. Samokov – Zhivkovo – Ihtiman (28 km); Zhivkovo – Verinsko – road interchange connecting to the Trakia Motorway (7.4 km);
Lot 21: Rehabilitation of Road I-9, Durankulak – Kavarna (47 km);Lot 22b: Rehabilitation of Road III-8402 and Road II-84. Vetren dol – Septemvri (4 km); Zvanichevo – Vetren dol – Velingrad – Yundola (45 km);
Lot 23b: Rehabilitation of Road II-62, Dupnitsa – Samokov (37 km);
Page 34 of 61 Lot 5: Rehabilitation of 2 sections of Road I-7, Silistra – Shumen (54 km and 52 km);
Lot 7: Rehabilitation of sections of Road II-53, Yambol – Sredets (64 km);
Lot 18: Rehabilitation of sections of Road II-13, Borovan – Knezha (total of 21 km); and Road II-81 Petrohanski prohod – Yonchevi hanove – Blagovo (total of 28 km).
3. Projects funded by the World Bank
The following tender procedures are scheduled for 2009:
Lot 8: South-west, Gotse Delchev – Pirin village and Petrich – Macedonian border (total of 65 km);
Lot 9: South-east, Burgas – Marinka – Zvezdets – Malko Tarnovo – Turkish border (total of 62 km);
Lot 5: Mid south, 3 sections. Pirdop – Karlovo – Kalofer, OP Chirpan – Zetyovo and Varbitsa – Skobelevo – OP; repair of bridge over the Maritsa river (total of 38.5 km).
4. Transport Operational Programme, 2007-2013
The Transport Operational Programme is one of seven operational programmes of the Republic of Bulgaria funded by EU Structural and Cohesion funds.
The Transport Operational Programme has five priority axes, four related to individual transport sectors.
The projects designed to develop road infrastructure are included in the programme's priority axis 2. The purpose is to build and develop key road infrastructure connections significant on the national, cross-border and European planes, and improving interoperability along major roads.
Page 35 of 61 There are 6 priority projects and 3 alternative projects on the 2009 Indicative List.
Transport Operational Programme Priority axis 2, Road Infrastructure Development Indicative work schedule for 2009
Total amount of Co- Minimum and Scheme / Deadline for the funding maximum project to Project submission of scheme/ by the amount of complete proposals project, in EU, % project, in Euro by Euro Connecting the 2nd quarter 36 000 000 Hemus Motorway to 36 000 000 80% 2013 2009 the Sofia Ring Road 50 000 000 Struma Motorway 2nd quarter - 600 000 000 80% 2013 (Lot 1 and Lot 2) 2009 600 000 000 Maritsa Motorway, 3rd quarter 208 587 356 80% 208 587 356 2013 km 5 to km 72 2009 Rehabilitation of a section of Road I-1 4th quarter 85 000 000 85 000 000 80% 2013 (E79) Vratsa- 2009 165 000 000 Blagoevgrad Kardzhali – 4th quarter - 32 000 000 80% Podkova 2009 32 000 000 Source: www.optransport.bg
1. Struma Motorway The project is a priority for the development of the Trans-European Transport Network along the Vidin-Sofia-Kulata transport axis.
It involves the building of the following sections:
- Lot 1: Dolna Dikanya – Dupnitsa (16,780 km)
- Lot 2: Dupnitsa – Simitli (45 km)
- Lot 4: Sandanski – Kulata (15 km)
Indicative value of project: EUR 600 million
2. Kardzhali – Podkova
Page 36 of 61 Involves the following project activities: rehabilitation of 12 km of existing pavement, building of two new stretches (16,5 km), from Kardzhali to Dzhebel and from Dzhebel to Podkova.
Indicative value of project: EUR 32 million
Funding sources: EUR 25,6 million from the Cohesion Fund; co-funding of EUR 6,4 million from the national budget.
3. Connecting the Hemus Motorway to the Sofia Ring Road Involves the following project activities: building of a new 8,5 km stretch of motorway to connect the existing Hemus Motorway to the Sofia Ring Road.
Indicative value of project: EUR 32 million
Funding sources: EUR 25,6 million from the Cohesion Fund; co-funding of EUR 6,4 million from the national budget.
4. Maritsa Motorway – km 5 to km 72 Involves the following project activities: 67 km motorway starting from the completed section of the Maritsa Motorway at km 5+000, ending in the beginning of the Harmanli-Lyubimets motorway section, at km 72+000.
Indicative value of project: EUR 208 587 362
Funding sources: EUR 166 869 890 from the Cohesion Fund; co-funding of EUR 41 717 472 from the national budget.
5. Modernizing a section of Road I-1 (E 79) Vratsa – Botevgrad Involves the following project activities: converting the existing two-lane road to a 31.5 km four-lane road between Mezdra and Botevgrad along the E-79 and the Trans-European Transport Network.
Indicative value of project: EUR 85 million
Funding sources: EUR 68 million from the Cohesion Fund; co-funding of EUR 17 million from the national budget.
6. (E 79) Vidin - Montana
Page 37 of 61 Involves the following project activities: building a 20,5 km first-class road along a new bed, between Dimovo-Bela-Ruzhinci along E-79 and Corridor IV. Indicative value of project: EUR 32 million
Funding sources: EUR 25,6 million from the Cohesion Fund; co-funding of EUR 6,4 million from the national budget.
5. Regional Development 2007-2013 Operational Programme
In support of measures aimed at reconstruction and renovation of towns, tourism development, development of local and regional transport solutions and support of comprehensive initiatives for regional and local development. The programme is funded by the EU Regional Development Fund.
Activities to improve the municipal road system of 86 municipalities will be funded under the second priority axis of the Regional Development Operational Programme entitled Regional and Local Accessibility, Operation 2.1 Regional and Local Road Infrastructure.
The total amount of funds that will be allocated in the form of grants from 2007 to 2013 will be BGN 501 091 393.
In the beginning of 2009 the Road Infrastructure National Agency, being a beneficiary under the Programme, submitted a Mid-term Framework Investment Plan to the Ministry of Regional Development and Public Works. It involves rehabilitation and reconstruction of second- and third- class roads from the national highway system of a total of 1 300 km. The Plan will be implemented in three stages.
The proposals on stage one include 25 stretches of a total of 352,956 km. Those are high-priority projects which are ready to launch. Projects may commence following evaluation by the managing authority of the Regional Development Operational Programme and the signing of the contract.
The Road Infrastructure National Agency is preparing for the tenders for the award of the public contracts for construction and third-party
Page 38 of 61 supervision for the projects included in stage one of the investment plan. Tenders are expected to start in April 2009.
The documents for stage two of the implementation of the Plan are expected by November 2009, and those for stage three – in 2010.
6. Environment Operational Programme
The Environment Operational Programme is designed to improve, preserve and restore the natural environment and to develop environmental infrastructure. This will be achieved by implementing a number of specific objectives: preservation and improvement of water conditions, improvement of waste management and soil conservation, and biodiversity preservation and protection of nature.
The Environment Operational Programme is funded by the EU Cohesion Fund and co-funding from the national budget.
According to the indicative work schedule for 2009 of the Environment Operational Programme, the following grants have been allocated:
Priority axis 1: improvement and development of drinking- and waste- water infrastructure in settlements of more than 2000 inhabitant equivalents, and in settlements of below 2000 inhabitant equivalents within the limits of agglomerated urban areas, BGN 332 282 000.
Priority axis 2: improvement and development of waste-treatment infrastructure, BGN 461 874 000.
Evaluating the options to implement investment proposals by stating the amount of available resources and reflecting possible changes in the structure of funding for this activity
The strategic focus of the Company on all activities involved in road engineering and maintenance determines its investment policy as well.
Expected in 2009 are investments of some BGN 10 million on a consolidated basis depending on whether new building contracts are
Page 39 of 61 concluded. The expected investment will be in the purchase of new machinery for the manufacture and laying of road pavement, road- rehabilitation equipment, processing equipment. We are also planning to invest in machinery and equipment for winter- and summer road maintenance.
The cash flows required for the implementation of our investment programme are based on a consolidated budget derived from the detailed budget of each company. Holding Roads PLC relies also on banking and leasing institutions for the funding of its operations. Using investment loans the Company may purchase high-value machinery and equipment of long useful lives.
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5. Significant Transactions
Large-scale and significant transactions concluded
1. Construction Contracts
In 2008 Holding Roads PLC and its subsidiaries concluded the following large-scale contracts:
− Contract for implementation of the Project for Road Infrastructure Rehabilitation, LOT 3 North Eastern Region, at the value of BGN 30 784 516,58, VAT excluded. The Contractor under this contract is Roads-Razgrad JV in which Holding Roads Plc is a leader. The term of execution of the site is 24 months;
− Contract for implementation of the Project TRANSIT ROADS V – LOT No: 23A, Section 1 Road II-62 ‘Kyustendil Bypass Road – Dupnitsa’ from km 0+00 to km 37+465, Section 2 Road I-1 ‘Bypass Road – Dupnitsa’ from km 326+939 to km 331+552, with a total length of 42.048 km and at the value of EUR 14 877 777,00, VAT excluded. The Contractor under this contract is JV Roads- Kyustendil, in which Road Engineering M JSC (Pat Inzhenering-M EAD) - a subsidiary of Holding Roads Plc within the meaning of Art.277, Para.2 of the Trade Act is a leader partner. The term of execution of the site is 24 months. The project will be funded by the European Investment Bank and the state budget;
− Contract for implementation of the Project TRANSIT ROADS V – LOT No: 6, Road II-79 ‘Elhovo – Burgas’, a section from km 0+000 to km 86+200, with a total length of 86.200 km and at the value of EUR 31 500 000, VAT excluded. The Contractor under the contract is JV Roads-Burgas in which Holding Roads Plc is a leader partner. The term of execution of the site is 24 months. The
project will be funded by the European Investment Bank and the state budget.
− Contract Reconstruction of the Road from Kuben to Peroi and Kapsit, Dibra Region on the territory of the Republic of Albania. The Contractor under this contract is JV Balkan Roads in which Holding Roads Plc holds a 51% interest. The value of the contract is 181 171 091 Albanian Leks (about EUR 1 460 000);
− Contract for construction of site Four Multifamily Residential Buildings with Shops and Underground Garages in Sofia City, Vitosha Region, Manastirski livadi – West Hous. Estate, quarter 7, zoned property I-1503” at the value of BGN 11 927 807.56, VAT excluded. The Contractor under the contract is Road Construction Equipment JSC (Patnostroitelna tehnika EAD), a subsidiary of Holding Roads Plc within the meaning of Art. 277, Para.3 of the Trade Act. The term of execution of the construction and assembly works, subject to the contract, is 14 months;
− Project for Road Infrastructure Rehabilitation, Lot 1 – North Western Region. The Contractor is JV Roads Vidin in which Holding Roads Plc is a leader partner. The value of the contract is BGN 13 993 496, VAT excluded;
− Contract for Engineering – Design and Construction of Road III-908 Raduntsi – Borushtitsa from km 20+ 700 to km 27 + 100. The value of the contract exceeds 10% of the average revenues generated by the Company during the last 3 years. The term of implementation of the project is 23 months;
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− Contract for Rehabilitation of Municipal Road Bansko – Vihren Mountain Hostel, including the Turn to Chalin Valog Locality. The value of the Contract surpasses 10% of the average revenues generated by the Company during the last 3 years;
− Contract for Sewerage System and Main Sewerage Collector in the village of Pudria, municipality of Krivodol, entered into between Road Engineering M JSC (Patinzhenering-M EAD) and Krivodol Municipality, at the value of BGN 8 572 115,35;
− Contract for engineering (design and construction) of site Rehabilitation of Road III-812 Berkovitsa – Varshets, from km 0+000 to km 15+546, entered into between Road Engineering M JSC (Patinzhenering-M EAD) and District Road Directorate – Montana, at the value of BGN 3 147 785,39;
− Contract for Performance of Construction and Assembly Works under Project BG161PO001/2.1 – 02/2007/012 – Supporting the sustainable and integrated local development by reconstruction of the municipal road in Mezdra Municipality – Road VRC 1143- /III – 103/’, entered into between Road Engineering M JSC (Patinzhenering-M EAD) and Mezdra Municipality, at the value of BGN 2 672 160,11;
− Contract for Engineering – preparing a work design for reconstruction and rehabilitation of out-of-regulation sections of municipal roads KNL – 1061 Dupnitsa – Bistritsa, KNL – 1056 Dupnitsa – Yahinovo, KNL – 3063 Dyakovo – Kremenik, KNL – 2058 Dupnitsa – Balanovo, entered into between Road Engineering M JSC (Patinzhenering-M EAD) and Dupnitsa Municipality, at the value of BGN 4 099 000,00;
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− Contract for Rehabilitation of Road II-14 Bypass Road Vidin – Kula – Vrashka chukka – Border R Bulgaria, a Section from km 21+578 to km 27+412, entered into between Vida Road Construction JSC (Vidapatstroy EAD) and Road Infrastructure National Agency, at the value of BGN 2 915 676.81, VAT excluded;
− Contract for On-going Repair and Maintenance and Winter Maintenance of Roads from the Republican Road Network on the territory of District Road Directorate – Vidin with a length of 260 km in Belogradchik District /road sections group/, entered into between Vida Road Construction JSC (Vidapatstroy EAD) and Road Infrastructure National Agency, at the value of BGN 2 726 704.05, VAT excluded;
− Contract for construction and assembly works of site Danube Bridge Vidin –Kalafat; sub-sites: 1 – A Ground for Reinforced Concrete Products, 2. ‘Road IV Vidin – Antimovo, 3. Overhead Crossing – S.Bara, entered into between Vida Road Construction JSC (Vidapatstroy EAD) and FCC Construccion – Branch Bulgaria, at the value of BGN 2 363 678.25, VAT excluded;
− Contract for sale of products, entered into between Vida Road Construction JSC (Vidapatstroy EAD) and FCC Construccion – Branch Bulgaria, at the value of BGN 3 037 091.82, VAT excluded;
− Contract for construction, entered into between Road Engineering JSC (Patinzhenering AD) and Metro Cash and Carry – Bulgaria, at the value of BGN 2 636 thousand, VAT excluded.
− Contract for Rehabilitation of Transportna Street and a Crossroad, entered into between Burgas Road Construction JSC
Page 45 of 61 (Burgaspatstroy AD) and Burgas Plazza AD, at the value of BGN 1 075 400, VAT excluded;
− Contract for Municipal Road Network Maintenance, entered into between Burgas Road Construction JSC (Burgaspatstroy AD) and Pomorie Municipality, at the value of BGN 1 800 000, VAT excluded;
2. Acquisition of Fixed Assets − Participation in the incorporation of public limited liability company BALKAN ROADS PLC on the territory of the Republic of Albania in which Holding Roads Plc holds a 51% interest;
− Participation in the incorporation of public limited liability company Smart Way PLC in which Holding Roads Plc holds a 75% interest;
− Participation in the incorporation of Moststroy East AD in which Holding Roads Plc holds a 10% interest. The subject of activity of this company is: building, repair and maintenance of roads and road facilities and it is created to participate in public procurement tenders in Poland, Ukraine and Russia;
− Participation in the incorporation of Consortium M&M Construction 2008 in which Holding Roads Plc holds a 25% interest;
− Acquisition of 97.66% of the capital of trade company AVB-2004 Plc. The shares will be acquired by Lear Company Plc and the transaction will be closed after the relevant permission is issued by the Commission for the Protection of Competition;
− Acquisition of 51% of the capital of ZAT Kompanya Tzentar, incorporated in Kiev – Ukraine;
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− Patinzhenering-M EAD, Montana, a subsidiary of Holding Roads Plc within the meaning of Art. 277, Para.3 of the Trade Act; acquired 21 575 shares in the capital of Patstroyinzhenering AD – Vratsa.
3. Loan Agreements − Framework Facility Agreement with UniCredit Bulbank AD of the City of Sofia made together with Moststroy AD (as Borrowers). The total amount of the facility provided to the two companies under said Framework Agreement is EUR 25 million. Holding Roads PLC may use under its individual facility up to EUR 25 million, provided that the amounts used by Moststroy AD under its individual facility (up to EUR 13 million) are complied with. The amounts used by Holding Roads PLC (under conditions of a revolving credit facility) must be repaid within 1 year of signing, and the agreement contains a renewal clause. The obligations under the individual loan agreement are secured by means of registration of special pledges of receivables under building contracts (where the pledgor is a third party, other than Holding Roads PLC).
− Loan Agreement with UBS AG, Switzerland, for the purpose of purchasing a fixed asset –Global 160 Quick asphalt plant.
− Credit Contract with Patinzhenering-M EAD for the acquisition of Patstroyinzhenering AD – Vratsa.
Transactions with related parties Transactions concluded between Holding Roads PLC and its related parties during the reporting period and transactions outside the regular course of business or such that depart materially from established market conditions where the Shareholding Company or a subsidiary thereof is party
Page 47 of 61 Relation Amount, No Regarding Counterparty BGN 1 Loan obtained Vida Road Construction EAD Subsidiary 1 030 000.00 2 Loan provided Vida Road Construction EAD Subsidiary 200 000.00 3 Loan obtained Road Construction Equipment EAD Subsidiary 1 300 000.00 4 Loan provided Road Construction Equipment EAD Subsidiary 371 037.05 5 Loan obtained Road Engineering M EAD Subsidiary 2 172 209.00 6 Loan provided Road Engineering M EAD Subsidiary 1 395 332.00 7 Loan obtained Burgas Road Construction AD Subsidiary 1 284 559.00 8 Loan provided Burgas Road Construction AD Subsidiary 296 000.00 9 Loan provided Stara Zagora Roads EAD Subsidiary 82 500.00 10 Loan provided Road Engineering AD Subsidiary 887 000.00 11 Loan obtained Road Maintenance Yablanitsa Subsidiary 315 000.00 12 Loan provided Smolyan Patstroy EAD Subsidiary 215 672.28 13 Loan provided Patstroy EAD Subsidiary 4 088 532.81 14 Loan provided Bulber EOOD Subsidiary 3 534 244.42 15 Loan provided Moststroy East AD Subsidiary 143 731.26 16 Loan obtained PST Rosi EOOD Subsidiary 58 000.00 Association under the 17 Loan obtained JV Roads Obligations 352 331.27 and Contracts Act, partner Association under the 18 Loan obtained JV Sofia Roads Obligations 350 000.00 and Contracts Act, partner Association under the 19 Loan obtained JV Kyustendil Roads Obligations 1 887 375.95 and Contracts Act, partner Routine repairs and maintenance 4 / 20 Vida Road Construction EAD Subsidiary 279 957.02 LOT 5 Delivery, installation and warranty 21 Vida Road Construction EAD Subsidiary 55 733.93 service of steel fencing, North-west Routine repairs and maintenance 4 / 22 Road Engineering M EAD Subsidiary 2 568 668.22 LOT 5 Routine repairs and maintenance and winter maintenance of 638.691 of 23 Road Engineering M EAD Subsidiary 6 373 825.64 roads for the Vratsa Municipal Road Authority 24 Street sewers Road Engineering M EAD Subsidiary 194 287.31 Delivery, installation and warranty 25 Road Engineering M EAD Subsidiary 344 677.69 service of steel fencing, North-west Routine repairs and maintenance 4 / 26 Patstroy EAD Subsidiary 4 005 806.03 LOT 5 Routine repairs and maintenance 4 / 27 Patstroy EAD Subsidiary 4 992 432.24 LOT 8
Page 48 of 61 Routine repairs and maintenance 4 / 68 615.22 28 Road Engineering AD Subsidiary LOT 5 Routine repairs and maintenance 4 / 29 Road Engineering AD Subsidiary 819 886.59 LOT 8 Routine repairs and maintenance and 30 winter maintenance of roads for the Road Engineering AD Subsidiary 2 401 925.03 Pleven Municipal Road Authority Nikopol – Turnu Magurele border 31 Road Engineering AD Subsidiary 87 697.49 checkpoint 32 Street repairs, town of Pordim Road Engineering AD Subsidiary 90 413.06 Routine repairs and maintenance and winter maintenance of roads for the 33 Road Construction Equipment EAD Subsidiary 197 913.89 Sofia Municipal Road Authority, Slivnitsa District Traffic organization, Metropolitan 34 Road Construction Equipment EAD Subsidiary 4 572 972.95 Municipality Routine repairs and maintenance 4 / 35 Road Construction Equipment EAD Subsidiary 1 452 795.10 LOT 5 36 Supply of fuel and petroleum products Vida Road Construction EAD Subsidiary 3 188 thousand 37 Supply of fuel and petroleum products Road Engineering M EAD Subsidiary 3 899 thousand 38 Supply of fuel and petroleum products Road Engineering AD Subsidiary 933 thousand 39 Supply of fuel and petroleum products Burgas Road Construction AD Subsidiary 2 618 thousand 40 Supply of fuel and petroleum products Road Construction Equipment EAD Subsidiary 1 844 thousand
41 Supply of fuel and petroleum products Patstroy EAD Subsidiary 15 100 thousand 42 Financial lease, Amman 160 Quick Road Engineering AD Subsidiary 3 650 000.00 43 Financial lease, Amman 160 Quick Vida Road Construction EAD Subsidiary 3 383 585.92 44 Financial lease, Amman 200 Quick Road Engineering M EAD Subsidiary 3 653 453.00 45 Financial lease, Amman 160 Quick Burgas Road Construction AD Subsidiary 3 102 283.09 46 Financial lease, Amman 200 Quick Road nstruction Equipment EAD Subsidiary 3 616 149.73
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At the regular Annual General Meeting of Shareholders held on 2nd of July 2007 it was resolved to authorize the managers of Holding Roads Plc to conclude transactions between the Company and any one of its subsidiary at the value of up to EUR 30 (thirty) million in the course of ordinary business operations of the Company, including to sign bank credit contracts and issue securities within the meaning of Art. 114, Para.8 of the Public Offering of Securities Act.
The transactions which were concluded are below the limits defined by the General Meeting of Shareholders.
Loan Agreements
Loan agreements made by Holding Roads PLC and its subsidiaries in the capacity of borrowers
Loan agreements made by Holding Roads PLC as borrower
Amount Repayment Party /BGN/ Date 1 Burgas Road Contruction AD 1 284 559.00 31.12.2009 2 Vida Road Construction EAD 300 000.00 31.12.2008 3 Vida Road Construction EAD 730 000.00 31.12.2009 4 Road Construction Equipment EAD 1 300 000.00 31.12.2009 5 Road Engineering M EAD 2 172 209.00 29.12.2008 6 Road Maintenance Yablanitsa EOOD 315 000.00 01.03.2009 7 PST Rosi EOOD 58 000.00 31.12.2010 8 JV Roads 352 331.27 31.12.2009 9 JV Roads Sofia 350 000.00 31.12.2009 10 JV Roads Kyustendil 1 887 375.95 31.12.2009
Page 50 of 61 Loan agreements made by Subsidiaries as borrowers
Amount Repayment Party Interest /BGN/ Date Burgas Road Construction AD 1 Holding Roads PLC 296 000.00 7,5% 31.12.2008 2 Road Engineering M EAD 30 000.00 7,5% 31.12.2009 Vida Road Construction EAD 1 Holding Roads PLC 100 000.00 7,5% 31.12.2008 2 Holding Roads PLC 100 000.00 7,5% 31.12.2009 Bulber EOOD 1 Holding Roads PLC 3 534 244.42 7,5% 31.12.2009 Road Engineering M EAD 1 Holding Roads PLC 1 395 332.00 7,5% 31.12.2009 Patstroy EAD 1 Holding Roads PLC 4 088 532.81 7,5% 31.12.2009 2 Road Engineering M EAD 191 000.00 7,5% 31.12.2009 Road Construction Equimpent EAD 1 Holding Roads PLC 107 000.00 7,5% 31.12.2009 2 Holding Roads PLC 264 037.05 7,5% 31.12.2009 3 Road Engineering M EAD 350 000.00 31.12.2009 Roads Stara Zagora EAD 1 Holding Roads PLC 82 500.00 7,5% 31.12.2009 Moststroy East AD 1 Holding Roads PLC 143 731.26 7.5% 31.12.2009 Smolyan Patstroy EAD 1 Holding Roads PLC 215 672.28 31.12.2009 Road Engineering AD 1 Holding Roads PLC 887 000.00 7,5% 31.12.2009 2 Road Engineering M EAD 74 200.00 7,5% 31.12.2009 3 Patstroy EAD 230 000.00 8.0% 31.12.2008
Page 51 of 61 Loan agreements made by Holding Roads PLC and its subsidiaries in the capacity of lenders Loan Agreements, Made by Holding Roads PLC as lender
Amount Repayment Party Purpose /BGN/ date 1 Road Construction Equipment EAD 371 037.05 31.12.2009 Working capital 2 Burgas Road Construction AD 296 000.00 31.12.2008 Working capital 3 Patstroy EAD 4 088 532.81 31.12.2009 Working capital 4 Road Engineering M EAD 1 395 332.00 31.12.2008 Working capital 5 Road Engineering AD 887 000.00 31.12.2009 Working capital 6 Smolyan Patstroy EAD 215 672.28 31.12.2009 Working capital 7 Vida Road Construction EAD 100 000.00 31.12.2008 Working capital 8 Vida Road Construction EAD 100 000.00 31.12.2009 Working capital 9 Bulber EOOD 3 534 244.42 31.12.2009 Working capital 10 Stara Zagora Roads EAD 82 500.00 31.12.2009 Working capital 11 Moststroy East AD 143 731.26 31.12.2009 Working capital
Interest accrues on the loans provided by Holding Roads PLC to subsidiaries at a rate of 7,5%.
Loan agreements made by Holding Roads PLC subsidiaries as lenders
Party Amount /BGN/ Interest Repayment date Purpose
Road Construction Equipment EAD
1 Holding Roads PLC 1 300 000.00 7,5% 31.12.2008 Working capital
Road Engineering M EAD
1 Holding Roads PLC 2 172 209,00 7,5% 31.12.2008 Working capital
2 Road Construction Equipment EAD 350 000.00 7,5% 24.10.2008 Working capital
3 Road Engineering AD 74 200,00 7,5% 31.12.2008 Working capital
4 Patstroy EAD 191 000.00 7,5% 31.12.2009 Working capital
5 Burgas Road Construction AD 30 000.00 7,5% 31.12.2009 Working capital
Burgas Road Construction AD
1 Holding Roads PLC 1 284 559.00 7,5% 31.12.2009 Working capital
PST Rosi EOOD
1 Holding Roads PLC 58 000,00 7,5% 31.12.2010 Working capital
Page 52 of 61 Road Maintenance Yablanitsa EOOD
1 Holding Roads PLC 315 000,00 7,5% 31.12.2009 Working capital
Patstroy EAD
1 Road Engineering AD 230 000.00 8.0% 31.12.2008 Working capital
Vida Road Construction EAD
1 Holding Roads PLC 300 000.00 7,5% 31.12.2008 Working capital
2 Holding Roads PLC 730 000.00 7,5% 31.12.2009 Working capital
Off-balance reporting Bank letters of guarantee are reported as off-balance sheet items. As at 31 December 2008, Holding Roads PLC has issued bank letters of guarantee for BGN 20 396 000, as follows: BGN 978 000 from Corporate Commerce Bank AD, BGN 16 954 000 from First Investment Bank AD, and BGN 2 464 000 from Eurobank EFG AD regarding construction and engineering contracts, prepayments obtained, supply of fuel and asphalt plants.
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6. Investments
Holding Roads PLC’s shareholdings, major investments in securities, financial instruments, intangible assets and properties, and shares held in companies outside the group
In 2008 Holding Roads Plc participated in the incorporation of public limited liability company BALKAN ROADS PLC on the territory of the Republic of Albania. The interest which Holding Roads Plc holds in the equity of the newly set-up company comprises 51%.
In 2008 the Holding participated also in the incorporation of public limited liability company Smart Way Plc in which equity it holds a 75% interest.
During the year Holding Roads Plc participated in the incorporation of Moststroy East AD in which equity it holds a 10% interest. The company is engaged in road and road facility construction, repair and maintenance, and was set up for the purpose of participation in public procurement tenders in Poland, Ukraine and Russia.
In 2008 the Consortium M&M Construction 2008 was set up in which equity Holding Roads Plc holds a 25% interest.
In 2008 a transaction was concluded for acquisition of 97,66% of the equity of trade company AVB-2004 AD. The shares were acquired by Lear Company AD, as the transaction will be closed after the relevant authorization is issued by the Commission for the Protection of Competition.
In 2008 an interest of 51% was acquired in the equity of ZAT Kompaniya Tzentar, a company incorporated in Kiev – Ukraine.
Patinzhenering-M EAD, town of Montana, a subsidiary of Holding Roads Plc within the meaning of Art. 277, Para.3 of the Trade Act, acquired 21 575 shares in the equity of Patstroyinzhenering AD - Vratsa.
Holding Roads PLC’s Participations in other companies Company Stake % Roads and Highways AD 99,98% Reconstruction and Maintenance AD 99,82% Bulber EOOD 100,00% Sofroad Construction EOOD 100,00% PST Rosi EOOD 100,00% „AVB-2004 AD 97,66% „Smart Way AD 75,00 % ZAT Kompania Centr, Ukraine 51,00 % Balkan Roads JSC, Albania 51,00 % Consortium M&M Construction 2008 AD 25,00 % Moststroy East AD 10,00 %
Roads and Highways AD Participations in other companies Company Stake % Road Construction Equipment EAD 100,00% Patstroy EAD, Lovech 100,00% Road Engineering M EAD, Montana 100,00% Vida Road Construction EAD, Vidin 100,00% Stara Zagora Roads AD, Stara Zagora 100,00% Burgas Road Construction AD, Burgas 95,62%
Reconstruction and Maintenance AD Participations in other companies Company Stake % Bridge Construction Engineering EAD, Sofia 100,00% Road Maintenance Vratsa EAD, Vratsa 100,00% Road Maintenance Sevlievo EOOD, Sevlievo 100,00% Road Maintenance Yablanitsa EOOD, Yablanitsa 100,00% Road Maintenance Oryahovo EOOD, Oryahovo 100,00% Smolyanpatstroy EAD, Smolyan 100,00% Road Engineering AD, Pleven 93,00%
Page 56 of 61 Road Construction Equipment JSC (Patnostroitelna tehnika EAD) – Sofia holds 100% in the equity of Vabo Imoti EOOD (Vabo Real Estate Ltd.). Burgas Road Construction JSC (Burgaspatstroy AD) – Burgas holds 100% in the equity of Burgaski Imoti EOOD (Burgas Real Estate Ltd.) Road Engineering M JSC (Patinzhenering-M EAD) – Montana holds 51,2% in the equity of Patstroyinzhenering AD –Vratsa.
Most of the acquired motor vehicles were purchased on leasing conditions.
The interests which were acquired during the year are funded by own funds. The acquisition by Road Engineering M JSC (Patinzhenering-M EAD) – Montana of 21 575 units in the equity of Patstroyinzhenering AD – Vratsa was funded by a loan.
Existence of branches
In 2009 Holding Roads Plc set up a branch in Albania known under the name Holding Roads PLC (Dega ne Shqiperi). The seat of the branch is at Temisoklu Germeni Street, office 3/10, Tirane. The branch is represented by Viktoria Simeonova Racheva Slavkova.
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7. Information about the shares
The shares of Holding Roads PLC are traded on the official market, segment B of the Bulgarian Stock Exchange – Sofia AD.
Issue: Stock exchange code: 6H2 (old HDPAT ) ISIN: BG1100031985
Since the beginning of 2008 a decline in the prices of securities has been observed all over the world. From the begging of 2008 until 18th of March 2009 the value of basic indexes of the Bulgarian Stock Exchange – Sofia JSC reduced, as follows: SOFIX by 85%, BG40 by 83% and BGTR30 by 82%. The price of shares of Holding Roads Plc also follows such trend and on 18th of March 2009 the price per share was BGN 2.05 which is lower by 90% in comparison with the price in the beginning of 2008. .
Holding Roads PLC Stock Prices
24,00
21,00
18,00
15,00
12,00
9,00
6,00
3,00
0,00 01.1.2008 01.2.2008 01.3.2008 01.4.2008 01.5.2008 01.6.2008 01.7.2008 01.8.2008 01.9.2008 01.10.2008 01.11.2008 01.12.2008
Weighted average price per share
Source: Bulgarian Stock Exchange Sofia AD
The issue 01 January 2008 – 31 December 2008
according to information from Bulgarian Stock Exchange Sofia JSC
Last weighted-average price: BGN 3,15
From 23 December 2008
Lowest weighted-average price*: BGN 2,5840
Highest weighted-average price*: BGN 21,78
Weighted-average price over the period*: BGN 5,17
Trading volume over the period (trading floor): 726 203 lots**
Turnover over the period (trading floor): BGN 51 199 060,80
Transactions during the period (trading floor): 16 168 transactions
* Values are adjusted (for capital increases, dividend distributions or reduction in the par value of the share)
** 1 lot = 1 share
In 2008, following a resolution made by the General Meeting of Shareholders, the equity of the Company was increased from BGN 432 000 to BGN 30 672 000 by issue of 30 240 000 new ordinary book-registered voting shares with face value of BGN 1 each one, according to the procedure and on the conditions of Art. 197 of the Trade Act, by own funds of Holding Roads Plc within the total amount of BGN 30 240 000, being a part of the Company’s profit for 2008.
Since 13th of March 2008 Holding Roads Plc has joined the SOFIX index in which the most liquid issues that are traded on the regulated stock exchange are included.
Since 23rd of September 2008 Holding Roads Plc has also joined the BG40 index in which the issues of shares of the 40 companies which concluded the biggest number of transactions over the last 6 months are included, as well as the BG TR30 index which is based on the alteration of prices of the
Page 60 of 61 shares, included in the index by equal weight of each one of the participating issues.
Information about the use of funds from the new issue of securities during the reported period
During the reported period Holding Roads Plc did not issue a new issue of shares.
Information about the existence of arrangements known to the Company as a result of which the relative share of units or bonds held by the present shareholders or bondholders may change in the future
Holding Roads Plc does not have information about the existence of arrangements as a result of which the relative share of units held by the present shareholders may change.
Investor contact, incl. telephone and mailing address:
Investors may obtain further information from Ms. Biserka Ilieva, Holding Roads PLC, Investor Relations Director. Telephone (02) 42 10 307. Mailing address: 1000 Sofia, 3 Moskovska St.
Adopted at a meeting of the Management Board held on 25 April 2009.
Acknowledged by: Mr. Orlin Hadzhiyankov Dr. Filip Stoyanov President of the Management Vice President of- Board and Executive Director Management Board And Executive Director
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